Industry Insider | Mike Kydd

Diageo’s seer of spirits

We go behind-the-scenes with Diageo Scotland’s Bulk Spirits Commercial Director, Mike Kydd, to discover the secrets of cask management and to explore how your favourite spirits are made.

Mike, tell us, what does your role as Diageo Scotland’s Bulk Spirits Commercial Director entail?

I lead a Spirit Supply planning team based at our Technical Centre in Menstrie, Clackmannanshire. We have functional responsibility for the end-to-end management of Diageo’s maturing Scotch and Rum spirit supply chains. This includes managing our inventory in line with projections for future demand, cask selection, preparing blends for bottling and all aspects of the logistics behind that. It’s a bit like operating an air traffic control tower, co-ordinating, guiding and directing operational activities across our Scotch distillation and maturation warehouses on spirit requirements. We also work closely with our brand teams to agree long-term plans and to ensure supply and demand are working in close harmony.

What is your career background, how long have you been in the industry?

I was recruited by United Distillers 29 years ago into the role of Financial Controller at the old Dewars bottling plant at Inveralmond, Perth, after training and qualifying as a Chartered Accountant. I have been fortunate in my career since to have enjoyed a wide range of fulfilling roles and experiences all with the same employer – initially United Distillers and then its successor Diageo. I was given responsibly for Diageo’s Scotch commercial bulk trading and inventory management operation back in 2005. Sixteen years later it remains an absolute privilege to still serve in that post as I get to enjoy a unique window seat on all aspects of Scotch’s spirit supply network.

What trends/changes in the industry have you noticed in this time?

I have witnessed significant changes over the past three decades. The increasing ‘Internationalisation’ of the industry has been a major feature. Although Scotch has always been a global trade, the scale of investment that has come in has been incredible. At a time when Scotch is facing unprecedented levels of competition from other whiskies and from other spirit categories, it has been hugely positive to see Scotch remaining so strong at the forefront of global spirits. On the Scotch supply side, I would have to highlight a continuous improvement drive towards greater efficiency and productivity, and a greater appreciation for the environmental impact and sustainability of our supply chains. We can never take our success in Scotch for granted and the continuous improvement evolution of our supply processes is vital if we are to maintain our spot on the shelf in market.

The pace and scale of product innovation and creativity has been another amazing development. There has been an explosion of choice and variety in the new product development space. The shelves of the staff shop look unrecognisable these days compared to the offerings on display when I first came through the doors.

How many casks do you manage, and what does an average day look like to you?

Diageo have the largest Scotch whisky sales in the world and that means we have more casks of Scotch maturing in Scotland than any other company. We currently have more than 10 million casks of maturing spirit in Scotland. Naturally, most lie maturing for a number of years, but we will typically be adding and removing more than a million casks to our inventory every year as new spirit is laid down and mature stock is disgorged for blending and bottling.

My daily pattern starts with a check-in Zoom meeting with my management group and then rotates into planning meetings with our colleagues across distillation, maturation, and bottling. The day is never 9 to 5, I have customers in the Far East and America that might merit video links early morning or into evening depending on time zones. There is always a crowd of emails wanting attention too and progress made on those by the end of a day always helps make the evening dram of Johnnie Walker Black Label taste all the more satisfying in the armchair!

Tell us about the challenges involved when projecting customer demand years in advance.

Ah, the ‘crystal ball’ question! If you have one, can I borrow it please?

The single biggest challenge in managing stocks against demand is the volatility caused by inherent forecast inaccuracy and the consequences it causes once actual demand becomes a reality. Inventory managers will tell you it’s always better to be ‘looking at’ casks in the warehouse than ‘looking for’ casks. If forecasts are subsequently found to be at risk of ‘over-cook’ then it’s certainly a less painful journey of adjustment than when they are found to be ‘under-called.’

We revert to complex economic modelling of markets, long term GDP predictions and historical Scotch performance trends to land a best view of category growth over the outlook period. It’s a never-ending process of review and adjustment.

How does your management of blends compare to that of single malts?

We have 29 single malt distilleries, but we are primarily a blended Scotch business. That allows us to manage our inventory flexibly because we have several options to play with, either utilising single malt for a particular brand, or finding a home for it in one of our many blended Scotch whisky brands.

We have a simple formulaic expectation: great new make spirit quality from our distilleries, plus great wood in maturation, equals great Scotch whisky for single malts and for blending.

Will you share your secrets about how to create a perfect Johnnie Walker blend?

I’d love to, but I’d have to shoot you afterwards! The recipes are kept under lock and key and known to only a handful of custodians. But the one secret I will happily share is that the key is quality and consistency.

The secrets of how these amazing brands get made have been passed down through the centuries. We are fortunate to have a wonderful brand archive that has the original blending books from the 19th century. We stay true to these today and it is the role of our whisky specialists to ensure the brands sold today stay true to the history and legacy of those that originally created them.

I imagine that sometimes there are casks that simply don’t work, how rare is that? And have you found any way to prevent it?

Wood and spirit are entirely natural products and there is an element of alchemy in the maturation process that can’t be 100% controlled, but by using good quality wood and by having such a strong understanding of what goes on in maturation, we have hugely reduced the chances of a cask not producing the whisky type we expect when it is disgorged.

We have strong processes for monitoring our stocks and that means we can identify any issues that might arise.

What are the greatest challenges involved with your job?

Working with the uncertainties and inaccuracies of long lead time forecasting of supply and demand is probably the biggest challenge. There isn’t much that keeps me awake at night, but the responsibility of making sure we have the right inventory to meet demand for 12 Year Old Johnnie Walker Black Label from consumers in China, India, USA and other regions of the globe in 2034 is quite something.

While most workforces are typically incentivised by short term performance targets and financial delivery, I am very aware that judgement day on the relative success of my time in role will only come after I’ve retired. Legacy has a long arm.

Tell me about the most rewarding elements of it.

Diageo’s purpose is ‘celebrating life every day, everywhere.’ Nothing gives me greater satisfaction as an employee than seeing the pleasure and enjoyment friends, family or members of the public get when enjoying one of our Scotch whiskies.

Cut me open and you’ll find Johnnie Walker printed on my soul, so you can imagine the joy I felt when visiting the new Johnnie Walker Princes Street visitor experience in Edinburgh for the first time recently. Sitting in the 1820 Bar up on the rooftop enjoying those spectacular panoramic views of the city from the terrace with a Johnnie and Ginger highball, I had to pause briefly and quietly reflect on all those memorable moments the brand and the business have given me over my career. That moment was more than enough reward for me that day.

Are you a fan of drinking whisky yourself ? What is your favourite dram?

I think there is a Scotch out there for everyone. My home dram default is Johnnie Walker Black Label – I prefer the orchestra of a blend to the soloist of a single malt.

Do you think your profession changes how you drink whisky, or would you say it deepens your appreciation for it?

I remain very much the accountant who is privileged to be custodian of the keys to one of the most incredible cellars of maturing Scotch stock in the industry. My time spent in this role has undoubtedly deepened my awareness, knowledge and insight on all things associated with Scotch spirit supply chains.

Our generation owes a huge debt of gratitude to those that have gone before us in building such an iconic global spirit centred in Scotland that is protected by Act of Parliament and gives employment and prosperity to so many across the nation.

Sláinte to that.